The resulting models which were arrived at using the forward stepwise procedure passed various goodness-of-fit tests as well as other tests of the significance of coefficients. This indicates that both CDS spread and Debt/GDP ratio improved the model’s predictive power in the case of the Euro zone while CDS spread was the only significant factor for Cyprus. Tests of the model using in-sample and out-of-sample data shows that it is capable of predicting default and non-default with a high degree of accuracy. 1.0 Introduction Sovereign default has been present in world economies throughout history. One of the countries that have defaulted in the past is Argentina. Very often, it is the same set of countries that are habitually in this state of economic crisis. The 2008 financial crisis has been described as one of the worst to be felt in this modern age since the Great Depression of 1933 (Your reference here). Its effects are still underway and countries around the world are trying their utmost to maintain financial stability. One of the newest currency unions and the most powerful in the world; the Euro-Zone, therefore makes an interesting study. One of the single most important events that preceded the spiralling downturn in the 2008 financial crisis is the Lehman Brothers failure on September 15, 2008. Prior to the 2008 financial crisis, the sovereign Credit Default Swap (CDS) market was not as significant as corporate CDS markets. This was due to the relatively stable outlook of developed nations within the Euro Block and the perceived minimal default risk associated with these countries. As a result of the Lehman Collapse, and other proceeding financial institutional failures, large losses worldwide were incurred, which had spill over effects eventually affecting entire economies. This resulted in negative implications for investor confidence and a reduction of credit in the market. The bailouts for these banks by the individual governments could only be made possible by incurring massive amounts of debt (Dieckmann and Plank 2011). This led Governments to increased risk of sovereign default and a global reassessment of credit risk. In turn, CDS in the sovereign market became highly liquid as the uncertainty of these nations became an issue, implying an increase in sovereign credit risk. Since 2012 the Euro zone has been characterized by deepening crises in several countries, some of which have suffered what is described as selective default. These crises have been characterised by increases in CDS spread, increased Debt/GDP ratio and high bond yields. This has led to credit rating agencies such as Moody’s and Standard and Poor’s giving ratings to some of these countries that indicate to investors the risks associated with government bonds. In addition to Cyprus and Greece, some of the countries that have received speculative ratings include Bulgaria, Hungary, Italy, Ireland, Latvia, Estonia, Portugal and Spain (Bloomberg 2013). Concerns have been raised that the ratings given by credit rating agencies are unreliable as the default ratings for Greece in 2012 and Cyprus in 2013 came after the event. The aim of this study is to evaluate the risk of sovereign default in the Euro zone and also to develop an econometric model that is capable of predicting default before the event takes place. This would be very beneficial to
Sovereign Default Risk in the Euro Zone: A further look at a possible exit Abstract Logistic regression analysis of panel data relating to 24 countries was used to develop a model to predict the probability of default in the Euro zone. In addition to that country specific data was also used n developing a Cypriot model…
With the passage of time, the issue of the sovereign debt crisis has been getting worse. There are several European Union countries who have taken loans in order to survive in these circumstances and strive to make their overall economic condition better.
This research aims to evaluate and present factors affecting the selection of proposed property for development of Green Zone such as densely populated residential area; cost sensitivity; proximity to schools; access to the property; health conditions of residents and services of similar trade in near vicinity.
The focus of the research will be to explain if there is any relation between the current account deficits and the growth crisis. The research concludes that import of final goods as well as the foreign demand played the strongest role in the development of exports during the Euro zone crisis between 2008 and 2009. The paper will also take into account the causes behind the crisis and the impacts it sheds around the globe.
Furthermore, due to globalization and industrialization, transactions involving foreign exchange have also risen dramatically over the years. This has given rise to increased incidences of risk encountered by commercial banks world-wide. Commercial banks today operate in a highly risky environment, which are encountered by them, on an almost daily basis, during the process of their routine banking activities.
The research place its focus on this new dimension of credit rating in the area of sovereign bonds that is still being unexplored by a large extent. However, this dimension is huge, and within the scope of this study it is not possible to cover this entire dimension as whole.
The report also shows whether the impacts have been positive or negative and what changes have the euro brought to the economic environment of the member countries of Eurozone. Finally after the analysis of the literature from economists and analysts, the conclusions regarding the impact of euro would be derived.
......1 1.2. Background of the Study..............................................................................................2 1.3. Scope of the Study.....................................................................................................
Besides, macro-economic fundamentals are introduced in analyzing and internalizing the effects of fire sales, which satisfies the international marginal calls. Similarly, bankruptcy regulations for capital restructuring provide reasonable solution to the problem in the short-run.
56 pages (14000 words)Dissertation
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